NFIB: Small Business Optimism, Hiring Plans Drop in February

Small business optimism took a turn for the worse in February, according to the latest National Federation of Independent Business reading. The NFIB index fell 2.7 points last month to 91.4, a reading which the organization said is historically associated with recessions and below-average growth. “Uncertainty is a major cause of the Index’s dip. Lacking any progress in Washington and facing continued unknowns with the healthcare law, the EPA, the minimum wage, tax reform and more, it is no surprise that the Small Business Optimism Index fell, reversing a few months of modest gains,” said NFIB chief economist Bill Dunkelberg in a statement released by the NFIB. Small business owners also reported inventory reductions: a net negative 2% of owners said they increased their inventories. “As long as uncertainty remains high, owners will remain cautious when it comes to increasing inventory. Business owners aren’t going to bet their money on a future they cannot see clearly,” said Dunkelberg.

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Additionally, falling optimism seems to have led to a change of mind when it comes to hiring plans. In January, job creation plans hit levels not seen since 2007. However, February’s report finds that business owners’ hiring intentions dropped 5 points to a seasonally adjusted net 7%. The only index component to rise in February was business owners’ plans to make capital outlays, which increased by one point to a net 25%. The NFIB says this is hardly a bright spot, though, pointing out that 25% is a “normal” reading not indicative of significant expansion. The February NFIB index is based on responses of 792 randomly sampled small businesses that belong to the NFIB. The survey was conducted throughout the month of February.